BORROWERS are being targeted in a new fraud epidemic called loan-fee scamming, yet nearly three-quarters of consumers have never heard of it.

The Financial Conduct Authority (FCA) is warning people to be on their guard against bogus lenders after calls to its helpline about the problem rose 44 per cent last year.

Sums demanded to secure credit that never appears can start as low as £25, but according to the regulator the average loss per person is £740, with total criminal gains from fake loan fees adding up to more than £3.5 million in 2017.

Yet according to FCA research, 72 per cent of the public are unaware that this type of crime, a form of advance fee fraud, exists.

Unsuspecting victims may answer an advert offering quick cash and have their application approved despite a poor credit history.

Or they can be approached after searching for loans online and, possibly, making unsuccessful applications to legitimate lenders.

Some would-be borrowers are persuaded to make multiple payments, supposedly essential to release the cash, before the lender vanishes.

Mark Steward, the FCA’s executive director of enforcement and market oversight, said: “Fraudsters target people making online loan applications and who think they’re being contacted by a legitimate loan provider, when they are not at all.

“Scammers take advantage of the excitement people feel when they are offered or accepted for a loan and make the loan conditional on an up-front fee, which can increase to hundreds of pounds.

"Of course, no loan ever materialises.”

Last year, the police’s Action Fraud line received over 4,700 calls about loan-fee scamming and it is now the most common issue reported to the FCA.

Scammers generally target the financially vulnerable who have limited income, need cash urgently or have low credit ratings.

The majority will struggle to access mainstream credit and they may lack confidence when dealing with money.

This makes them less likely to question the terms offered when they answer an advert or a lender makes contact out of the blue by text, email or phone.

In the FCA survey, 34 per cent of respondents admitted they were not sure how to find out if a lender was legitimate and 36 per cent of those who had taken out a loan in the past three years did no checks, with the same proportion saying they tended to accept what financial firms told them.

All legitimate loan providers are authorised by the FCA. While some do charge fees in advance, being asked to pay before receiving a loan can be a sign of a scam.

Mr Steward said: “Before applying for a loan always check who you’re dealing with, be sceptical, make sure the loan provider is authorised by the FCA.

"Check our register at”

Even if the representative claims to work for a mainstream bank, building society or well-known online provider, ensure they are who they claim to be by checking their contact details against the firm’s listing.

If in doubt, take time to think. If you decide to get back in touch, use the main switchboard number on the register, never the direct line, email address or web link they supply.

Fraudsters will offer persuasive reasons for demanding a fee, calling it a deposit, administration charge or an insurance premium for those with low credit ratings, and they may claim it is refundable.

Other warning signs of a fake lender include being asked to pay in an unusual way, such as by iTunes vouchers, Western Union or other money transfer service, being put under pressure to pay quickly or being asked for multiple fees.

Legitimate lenders who charge up-front fees will send a notice setting out certain information before taking payment.

This must include their legal name as it appears on the FCA register and a declaration that the firm is acting as a credit broker.

There should be a statement saying you will, or may, be charged for its services, the amount of this fee or how it will be calculated, and when and how it will be taken.

You will be asked to reply, acknowledging that you have received the information and confirming you understand it.

If the firm does not follow this procedure, the loan is likely to be fake.

Suspected loan scams can be reported to the FCA either online at or by calling 0800 111 6768.

Fraud should also be reported to national fraud and cyber crime agency Action Fraud at or on 0300 123 2040.